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Saturday, January 29, 2011

My super secret sources alerted me to heavy call buying in MEE on friday. MEE was trading around $56 on friday but somebody bought 10,000 Feb $65 call options. These calls are almost 15% out of the money, so the person was obviously banking on a buyout before the third friday of February.

Lo and behold, this comes out this morning. Alpha Natural Resources is in talks to buy-out MEE in a deal valued at $69-$70/share.

The 10,000 calls bought between $30-$60 a contract are now worth $400-$500 per contract. A gain over 1300%!!!

Thursday, January 27, 2011

Forbes has an article out about how much money SEC schools earn and spend on their football programs. Its very interesting....and explains why my bulldogs have sucked the past few years. Below are revenues and expenses for the 12 SEC schools from 7/1/09-7/30/10. Unfortunately, Auburn kept its Cam Newton payments off its balance sheet.

Stadium Capacity

Football Revenue

1

Univ. of Alabama

101,821

$71,884,525.00

2

Univ. of Georgia

92,746

$70,838,539.00

3

Louisiana State Univ.

92,400

$68,819,806.00

4

Univ. of Florida

88,548

$68,715,750.00

5

Auburn Univ.

87,451

$66,162,720.00

6

Univ. of South Carolina

80,250

$58,266,159.00

7

Univ. of Tennessee

102,037

$56,593,946.00

8

Univ. of Arkansas

76,000

$48,524,244.00

9

Univ. of Kentucky

67,606

$31,890,572.00

10

Mississippi State Univ.

55,082

$14,551,275.00

11

Vanderbilt Univ.

41,448

$14,152,061.00

12

Univ. of Mississippi

60,580

$11,920,510.00

Football Expenses

1

Univ. of Alabama

$31,118,134.00

2

Auburn Univ.

$27,911,713.00

3

Louisiana State Univ.

$25,566,520.00

4

Univ. of Florida

$24,457,557.00

5

Univ. of South Carolina

$22,794,211.00

6

Univ. of Arkansas

$22,005,104.00

7

Univ. of Georgia

$18,308,654.00

8

Univ. of Tennessee

$17,357,345.00

9

Vanderbilt Univ.

$14,152,061.00

10

Univ. of Kentucky

$13,905,724.00

11

Univ. of Mississippi

$11,920,510.00

12

Mississippi State Univ.

$9,951,097.00

Football Profit

1

Univ. of Georgia

$52,529,885.00

2

Univ. of Florida

$44,258,193.00

3

Louisiana State Univ.

$43,253,286.00

4

Univ. of Alabama

$40,766,391.00

5

Univ. of Tennessee

$39,236,601.00

6

Auburn Univ.

$38,251,007.00

7

Univ. of South Carolina

$35,471,948.00

8

Univ. of Arkansas

$26,519,140.00

9

Univ. of Kentucky

$17,984,848.00

10

Mississippi State Univ.

$4,600,178.00

11

Vanderbilt Univ.

$0.00

12

Univ. of Mississippi

$0.00

While I can't brag about any national championships, I can brag that my school is the most frugal in the SEC! Perhaps this is why UGA can't win national championships.....or the liberty bowl.

Ford reports earnings tomorrow morning before the market opens. Expectations are high for Ford with analysts expecting results from Ford not seen since 2000.

I am long F 2012 $25 and 2013 $30 LEAPS because they are cheap ways of participating in any ford upside for the next two years and they costs about $100 vs almost $19/share.

Drive me to the land of bread and honey!

Update:

Ford reported their best annual profit since 2000. Ford's FY net income came in at $6.6 billion or $1.66/share. The fourth quarter income came in lower than anticipated, mainly due to higher commodity costs, one time refinancing charges, and increased advertising on new product launches. Also in 2010, Ford improved its balance sheet and paid down $14.5 billion in debt. Ford still has a substantial debt load at $19.1 billion, but reduced its debt service costs by $1 billion annually. But the company still ended the year with more cash than debt, something it has not done since 2006.

Due to the earnings miss in the 4th quarter, F was pummeled by short-term speculators and momentum investors. Shares are down over 16% since the earnings announcement. This is a good time to average down on F. I purchased more $25 leaps, a $20 leap, and a 17.50 leap. Also, you might look at selling $15 leap puts to get Ford shares at even more attractive prices in the future!

Netflix has been one of the hottest stocks over the past year, going from $48-$211. It is up $25 today after reporting earnings last night. Probably people covering their short positions as 25% of the float is short. It currently trades at 78X trailing earnings and has a forward p/e of 54.

I wish I had bought a ticket for the NFLX train a year ago, however, it is getting pretty crowded now and people should get off while they still can. A few problems that could cause Netflix to slip up in the future are:

1. streaming content is weak. New movies come out 30 days later than Redbox, and typically don't come out on streaming until 6 mos later. As NFLX forces subscribers to streaming only plans, they need to come up with more popular content or risk losing those subscribers.

2. Future margins are going to be squeezed as content owners demand more money for the right to license their content. If netflix wants the best content, they are going to have to pay a lot more for it then they are currently paying.

3. Expectations are so high on netflix that the slightest miss in earnings could cause a massive plunge as it is one of the more heavily shorted stocks around.

I think one way to play this is buying Jan 12 200/190 vertical put spreads. These costs around $500 and will return $500 if NFLX is below $190 come January 2012. If it keeps rallying you will lose the entire $500.

Wednesday, January 26, 2011

Tuesday, January 25, 2011

Norfolk Southers 4Q earnings improved 31 percent from the prior year. Revenue increased from $7.8 billion to $9.52 billion. CEO Wick Moorman said in a statement the company has "every reason to believe that 2011 will be an even stronger year for us." Another person who has been bullish on railroads lately is Warren Buffett, as he spent $26 billion to acquire Burlington Northern back in November. 1 yr target estimate is $72.88.